Exploring generational consumer behavior with buy now, pay later (BNPL)

Published January 23, 2023

Fewer shoppers took on debt to pay for 2022 holiday shopping compared to previous years. Of those that did take on debt, a third of shoppers said they expect to take five months or longer to pay off the debt they did incur. That is a 28% increase from 2021.

How did shoppers pay for their purchases this past holiday season?

  • Credit cards: 59%
  • Buy now, pay later: 24%
  • Store credit cards: 24%

The number of people using a buy now, pay later (BNPL) service declined by nearly a third during the 2022 holiday shopping season compared to 2021. Still, it remains an attractive option to consumers. A consumer study by Oracle Retail shows that 71% of consumers are open to financing options, such as store payment plans or a BNPL option.

However, exploring generational consumer behavior with BNPL shows significant differences.

Gen Z embraces BNPL

Forty-eight percent of Gen Z consumers said they used BNPL for purchases from October through December 2022. Of those, 20% said they used a BNPL solution more than three times.

Overall, 61% of Gen Z consumers aged 18 to 24 say they have bought items using BNPL. They are as likely to use BNPL for purchases as credit cards, though only about half of Gen Z consumers have a credit card, compared to two-thirds of millennials, 77% of Gen X and 85% of baby boomers.

Gen Z consumers say they are turning to BNPL financial services for purchases for several reasons, including enjoying flexible payment schedules and payment options, buying something they otherwise could not afford and wanting an alternative to credit cards. Shoppers today are already carrying high consumer credit card balances. In 2022, more than a trillion dollars of credit card debt was outstanding. The average household now owes $8,900 on their credit cards. 

Many are trying to avoid the high interest rates of credit cards and hits to their credit score. Others say they enjoy the transparency of the payment plan, so they know how long it takes to pay off a big purchase rather than the uncertainty of credit card payments. Paying over time allows consumers to see when payments are due, the exact amount required and when the payments will end.

Recent interest rate hikes by the Federal Reserve are also giving consumers pause. Factoring in the impact of rate hikes on credit card rates produced an additional $22.9 billion in credit card debt in 2022. With rising interest rates, many consumers are looking for alternative ways to pay without adding to their debt or hurting their credit scores.

Generational consumer behavior in BNPL

Not surprisingly, younger consumers are driving BNPL use. Breaking down generational consumer behavior shows the trend among BNPL users.

BNPL use by generation

  • Gen Z shoppers: 61%
  • Millennial shoppers: 40.6%
  • Gen X shoppers: 27%
  • Baby boomer shoppers: 20%

Examining the use of BNPL also reveals some differences in motivation. For example, high-income earners say they want to avoid interest payments or late fees. Lower-income earners chose BNPL primarily because they cannot afford to pay for items in full at the time of purchase.

BNPL use by income level

Those earning $50,000 or less say they choose BNPL for these reasons:

  • 54%: Cannot afford to pay in full
  • 53%: Greater flexibility in payments
  • 38%: No interest or fees
  • 36%: Convenience
  • 29%: Alternatives to credit cards
  • 27%: Makes purchases seem less expensive
  • 26%: Easy approval process

Those earning $100,000 or above say they choose BNPL for these reasons:

  • 58%: No interest or fees
  • 50%: Greater flexibility in payments
  • 34%: Convenience
  • 31%: Alternatives to credit cards
  • 26%: Makes purchases seem less expensive
  • 26%: Cannot afford to pay in full
  • 14%: Easy approval process

The future of BNPL

Overall consumer spending using BNPL companies is expected to grow significantly. A Juniper Research report predicts spending to grow from $112 billion in 2022 to $437 billion by 2027—an increase of more than 290%. The report cites escalating financial pressures, including the rising cost of living and increased demand for low-cost credit solutions, as contributing factors.

Future interest in using a buy now, pay later service is also highest among younger shoppers, although every age group showed increasing interest in becoming a BNPL user.

BNPL interest by generation

  • Gen Z shoppers: 65%
  • Millennial shoppers: 70%
  • Gen X shoppers: 50%
  • Baby boomer shoppers: 25%

While most users have incomes of $50,000 or less, 71% of those earning $100,000 or more annually are also increasing their use of buy now, pay later solutions.

Despite a decline during the last holiday season, BNPL usage in 2022 rose about 5% after showing an increase of 27% during the 2021 holiday season and 475% in 2020.

Retailers that don't offer BNPL options risk missing out

The majority of shoppers of all ages now expect retailers to offer BNPL as a payment option. For some, it provides an additional reason to shop at particular retail stores, department stores or online sellers. 

Retailers that fail to offer BNPL to consumers may miss out on significant sales. Thirty-one percent of consumers between the ages of 18 and 34 say that BNPL options at the store level make them more likely to shop. Twenty-six percent of consumers aged 35 to 64 agree, as do 13% of consumers aged 65 or older.

Retail stores, department stores and online retailers that offer BNPL have an opportunity to attract and retain customers looking to avoid adding to their credit card debt. Retailers also see three other significant benefits to offering BNPL:

  • Consumers are more likely to buy (rather than window shop) when BNPL is offered.
  • Consumers tend to spend more money than they would otherwise.
  • Once consumers have used BNPL, they are more likely to use it again.

BNPL can grow sales and revenue. Retailers that don't take advantage of using a BNPL provider can lose opportunities for growth, especially when it comes to the next generation of shoppers.


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